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Maiden Holdings details $56M in adverse development driving Q2 losses

Maiden Holdings Ltd. reviewed the reinsurance accounts that helped drive $56 million in unanticipated expenses and costs and canceled the account of one client in response, President and CEO Arturo Raschbaum said.

On Aug. 8, the company reported a net loss of $22.4 million, or 26 cents per share, compared with income of $30.9 million, 39 cents per share, in the prior-year quarter. The following day, Maiden's shares fell nearly 23% in morning trading to about $8.15.

Accounting for part of the net adverse development from the quarter was $29.4 million in the Amtrust Reinsurance business which represents business ceded by Amtrust to Maiden.

The diversified reinsurance business booked another $25.4 million in net adverse development. Most of the impact was from three accounts, Raschbaum said during a conference call to discuss earnings. Of the three accounts, the largest contributor was a commercial auto program, which Maiden terminated.

Most of the development from the diversified reinsurance segment came from the 2011 to 2014 underwriting years. The accounts that experienced most of the adverse development have been terminated or had terms and conditions changed since 2015, the CEO said. Underwriting performance since 2014 has remained within expectations, he said. The company does not believe the development is similar to the trend it experienced across its portfolio in recent quarters, which resulted from an elevated number of claims as well as higher per-claim costs from the 2011 to 2014 underwriting years. That issue mirrored an industrywide trend, he said.

Development in the Amtrust business in the quarter came mainly from general liability and workers' compensation, and severity was concentrated in New York and Florida. The book is still profitable for Maiden Holdings, Raschbaum said.

Also impacting the company's results were $6 million in non-catastrophe property claims. Maiden also reported elevated claims activity among other accounts and lines of business, but the company does not believe the development points to a systemic issue across its portfolio, Raschbaum said.

"We believe that we have responded appropriately to the elevated claims activity and latency in the quarter," Raschbaum said.